Is a crack in Maruti price a good opportunity to buy…???

The recent incident at Manesar plant had really cracked Maruti price down from Rs 1240 to Rs 1090. Many investors are jumping into to accumulate as many as possible.

Many brokerage houses and analysts have come out with their estimates. One of the brokerage houses has estimated that Maruti is making a loss of Rs 8 Crore for every single day lock out! But all the big brokerage houses have not yet cut their earnings estimate.

Talking about earnings, Maruti Suzuki has reported EPS for March 2012 year end Rs 56.6 which translates its ROE for the year at 11%. The recent merger with SPIL has been taken by many analysts and brokerage houses as a good strategy and sees synergy within this transaction. This transaction has also diluted 5% of its shareholders equity.

Maruti Suzuki had witnessed 5% growth in its sales revenue on the basis of their monthly vehicle sales reports for the first quarter of 2013. Many brokers are expecting its ROE for the year end 2013 at around 16% and for the year end 2014 around 18%.

With one side because of stiff competition and other factors Maruti is finding it hard to grow its sales revenue, it is hard for me to believe in those estimates.

Value Operations have given a quality and performance rating for Maruti Suzuki as ‘B2’. Looking at valuations for this company on a very conservative way, Value Operations value this business for year end 2013 to be Rs 690 and for 2014 at Rs 972. This translates it is still trading at big premiums.

What do you think? Is it a good time to get into Maruti Suzuki or just ignore and look for other available opportunity?

BHEL: Trading at discount… But is it worth to acquire now..?

4 Comments

Hi Nagesh,
Tata motors is a good company and is rated as B1, better rating than Maruti and is trading at big discounts. On general terms, I have found that Auto ancillary businesses are better option (better Q&P ratings) then investing directly in Auto sector. We expect Tata Motors IV for 2013 to be around Rs 600 on expected EPS of Rs 48 for 2013.

Ibrahim Salam,
Sorry, I just missed to reply to your comment. I like Amaraja Batteries and we do own this business in our fund. But today it is trading at fair price… stay tuned will share few more in future..